Condo Insurance Depends on the Association's Bylaws

If you’re a condominium owner, you need to insure possessions like furniture, clothing, and electronics. But do you also need to insure the unit itself — the floors, ceilings, walls and built-in appliances?

It all depends on your condo association’s bylaws.

Condo documents, which can be a fat, intimidating-looking stack of legalese, specify who’s responsible for insuring what, says Janet Scott-Buckley, manager of Harrington Insurance Agency’s office in North Andover, Mass.

There are two arrangements, she says. One type is called “all in.” That means the condo master insurance policy bought by the condo association covers both the building’s exterior and the units themselves.

“If your association has an all-in policy, you just need to insure everything that would come loose if you could pick up your unit and shake it,” Scott-Buckley says.

While an all-in master policy covers damage to your unit’s walls, floors, ceilings and built-in appliances, there is one catch. The policy typically pays to restore the unit to the condition it was in when you bought it.

So, if you’ve added expensive cabinets, flooring and wall coverings, you should buy coverage for

additions and alterations, she says.

The other type of master policy covers just the building itself. If that’s the case, you need to insure your unit from the walls in. Getting the right amount is a bit more involved since agents don’t have automated replacement-cost construction estimators for condos as they do for houses.

An experienced agent help you buy the right amount of coverage for the unit, if it’s needed, and your possessions, as well as sufficient liability insurance.

Loss-assessment insurance is an optional but recommended coverage, she says. It covers assessments on condo owners for losses not covered in full by the condo master policy.

For example, if there’s a fire in one building, all the condo owners in the development could be assessed to cover deductibles and other costs not covered by insurance. Loss-assessment coverage is inexpensive

“It’s smart to buy l

oss-assessment insurance, which provides a lot of protection at little extra cost,” Scott-Buckley says.

Small buildings can bring problems

Professionally run condo associations always have a master insurance policy. But these days, many condos are in small buildings that have just two or three units, and no one has bothered to buy a master policy, Scott-Buckley says.

If your condo is in such a building, make sure that there’s a master policy and that the condo association has a bank account.

She knows of a case where there was a major loss and the insurer made the claim check payable to the condo association. But it couldn’t be deposited because the association didn’t have a bank account.